Investors flock to precious metals once again

Bullions end higher for first time in three days

Precious metals ended higher on Thursday, 08 September 2011 at Comex. Prices shone after US stocks slipped once again following mixed set of economic data. It was first gain for bullions in three days. Global jitters too added to precious metals' shine on Thursday. Weak economic data and the prospects for more fiscal stimulus have driven gold to record highs this year, as investors seek a hedge against falling equities and as some fear potential for inflation and currency devaluation, particularly the U.S. dollar debasement.



Gold for December delivery rose $39.9 or 2.2%, to end at $1,857.5 an ounce on the Comex division of the New York Mercantile Exchange on Thursday. Earlier during the day, prices rose to a high of $1,868.7 during intra day trading. Last week, gold rallied 10%. It rose by $201 or 12% during the month of August.

On Thursday, silver prices for December delivery rose $0.90 (2.2%) to end at $42.53. Last week, silver gained 5.2%. For the month of August, silver gained 4.1%.

Among economic data expected for the day, the Labor Department said jobless claims rose by 2,000 to 414,000 last week, with the number exceeding expectations.

In a separate economic news, the Commerce Department reported that the U.S. trade deficit narrowed more than expected in July, with the gap shrinking 13.1% to $44.8 billion.

After oscillating between red and green earlier during the day, U.S. stocks once again slipped into red during mid session hours as the text of Federal Reserve Chairman Ben Bernanke's speech was released, with Bernanke vowing the central bank would do all it can to bolster economic growth and employment. Bernanke noted that a range of policy tools remain available to the Fed, but he gave no hint that any new tools will be put to work by the Fed. Markets was waiting to hear from President Barack Obama later Thursday where Obama is expected to unveil a $300 billion plan to jump start job creation.

Outside USA, analysts at Fitch stated that there is potential for both China and Japan to be hit with a debt rating downgrade. In addition, the European Central Bank kept its target rate at 1.50%, without the mention or introduction of any new monetary policy instrument. But ECB President Trichet dampened the mood by announcing a downward revision to the region's GDP forecast.

In the currency market on Thursday, the dollar index, which measures the strength of the dollar against a basket of six other currencies, rose by 0.8%.

Generally, a stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies and also vice versa. But bullion metals have registered increase in prices despite strong dollar in recent times and vice versa.

At the MCX, gold prices for October delivery closed higher by Rs 620 (2.3%) at Rs 27,802 per ten grams. Prices rose to a high of Rs 27,964 per 10 grams and fell to a low of Rs 27,246 per 10 grams during the day's trading.

At the MCX, silver prices for December delivery closed higher by Rs 1,231 (1.9%) at Rs 65,597/Kg. Prices opened at Rs 64,401/kg and rose to a high of Rs 66,000/Kg during the day's trading.